Medivation announced in its fourth-quarter earnings report that it expects revenue from its prostate cancer treatment Xtandi to land in the range of $500 million and $535 million for the fiscal year 2014. This came up well short of analysts' estimates of $683 million for the pill, which received approval in 2012 for men whose cancer has spread despite treatment with the chemotherapy drug docetaxel. Jefferies, which expected a full-year revenue total of $866 million, downgraded Medivation to "hold" and reduced its target price to $80 from $89.
Medivation is studying Xtandi as a potential treatment for patients prior to chemotherapy, which would broaden its use and should boost sales.
The weak guidance accompanied earnings that beat analysts' expectations. Medivation earned $2.8 million, or 3 cents a share, up from a loss of $31.7 million, or 43 cents a share, in the same period a year earlier. Collaboration revenue surged to $96.6 million from $37.2 million. Analysts called for a loss of 7 cents a share on $73.6 million in revenue.
TheStreet Ratings team rates MEDIVATION INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about its recommendation:
"We rate MEDIVATION INC (MDVN) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MEDIVATION INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, MEDIVATION INC reported poor results of -$0.56 versus -$0.56 in the prior year. For the next year, the market is expecting a contraction of 26.8% in earnings (-$0.71 versus -$0.56).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Biotechnology industry. The net income has significantly decreased by 193.4% when compared to the same quarter one year ago, falling from -$4.54 million to -$13.31 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Biotechnology industry and the overall market, MEDIVATION INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$4.50 million or 1531.15% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 3.40 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 3.69, which shows the ability to cover short-term cash needs.
- You can view the full analysis from the report here: MDVN Ratings Report